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Morgan Stanley, one of the world's most influential banks, developed the Morgan Stanley Semantic Index (MSSI). Morgan Stanley Semantic Index (MSSI)an innovative tool that analyzes the language of central banks to anticipate their next moves. This index makes it possible to identify whether entities have adopted a more restrictive or flexible policy, which can help anticipate decisions on interest rates in the short and medium term.
This week, the U.S. bank analyzed the monetary stances of the four main economies in the region: Brazil, Mexico, Colombia and Chile.
Brazil: Restrictive approach on the horizon
Brazil's MSSI showed a significant increase in December, suggesting that the Central Bank will adopt a more restrictive stance in the short term. This change could lead to a cycle of interest rate hikes to control inflation, with rates expected to reach a higher level this year.
Mexico: A shift towards flexibility
In Mexico, the MSSI reached minimum levels, indicating that the Bank of Mexico (Banxico) is adopting a more flexible, or dovish, stance. dovish. This could result in rate cuts, with two 50 basis point reductions expected in the coming months, guided by concerns about economic growth and inflation.
Colombia: From a position hawkish to a more flexible one
In Colombia, the MSSI indicated a position of hawkish in January, but this approach is expected to soften with the addition of new members to the central bank in March. A rate cut is anticipated at the March 31 meeting, although inflationary risks remain a concern.
Chile: More cautious than relaxed
Chile's MSSI showed a shift towards a more hawkish stance. hawkish stance earlier this year. While the central bank previously favored rate easing, it is now taking a more neutral, data-focused approach, with more caution on inflationary risks, which could dampen future cuts.
MSSI values by country:
Monetary policy rates
In Chile, the TPM remained at 5% in March, with inflation projected for 2025 at 4.6%. This approach reflects the Central Bank's cautious approach to the country's current economic conditions.
In Brazil, the rate rose to 14.25%, well above expected inflation for 2025 (5.06%). In Mexico, meanwhile, Banxico reduced its rate from 10% to 9.5% in February, with inflation projected at 3.7% for 2025. Finally, in Colombia, the rate remains at 9.5%, with an inflation projection of 4.5% for next year.
Latin America's economies are going through a key moment. Interest rate decisions in the coming months will be decisive, and tools such as Morgan Stanley's MSSI provide clues about possible future scenarios.
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